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Rent-control legislation will do little for the poor

If you’re interested in bringing a little New York-style government to Colorado, then you should be happy with House Bill 1017, sponsored by Rep. Daniel Kagan, an Englewood Democrat, who wants to bring us rent control.

Many people may not know it, but the state of Colorado has for decades had a prohibition on rent control, which is just what it sounds like, an effort by state or municipal government to set the price for residential rent.

In the past, those in state government had looked at the abysmal failure of attempts in places like New York to artificially control the price a landlord might charge for property. Coloradans wanted no part of it.

Rep. Kagan’s bill goes at the rent-control idea through the back door, authorizing local governments to enter into agreements with developers of rental units and presumably those with existing structures converting to rental units. The agreements would require a percentage of the units be available at a predetermined price established by some bureaucratic entity.

The reason this bill has come out now is not just because it is a time of government control run amok, but because a few communities in Colorado, predominantly mountain towns, have been trying to require a percentage of new rental properties be set aside for a particular income group at a fixed price.

As a result, a developer in Aspen challenged the ability of the local housing authority to force him to comply with restrictions requiring him to provide inexpensive workforce housing.

The developer took the matter to court, arguing the requirement was a form of rent control, which is, as I mentioned, prohibited in Colorado. The court agreed with the developer.

Apparently to head off a possible adverse appeals court ruling that would be binding throughout the state, a group called The Economic Opportunity Poverty Reduction Task Force recommended some “clarifying” legislation to allow public entities to enter into agreements with rental housing developers. Such agreements could require a percentage of a project be made available at a government-approved price in return for land-use approval.

According to the Denver Daily News, groups like the Colorado Apartment Association say this is hardly a level playing field on which to reach agreement, since the government can withhold approval until the property owner complies.

The failure of rent-control schemes is well-documented and has been shown to lead to reduced construction of rental properties. In the case of New York, it created a boom in the condo-conversion market as landlords converted their rental properties to condominiums. They did this to avoid the devaluation that occurs with a building with units that must be serviced, repaired and upgraded, but that cannot be offered for rent at fair-market value.

Essentially, this becomes subsidized housing, with the subsidy paid by the property owner. As a consequence, owners often seek to meet their costs by slowing down repairs or upgrades to rent-controlled apartments, which eventually leads to a loss of value and lower rents in the surrounding units.

A listener to my radio show commented that a textbook that he had used at Mesa State College, “The Economics of Public Issues,” had an entire chapter dedicated to discussion of rent control. It was called “Bankrupt Landlords, From Sea to Shining Sea.”

The authors point out the results of rent control: “poorly maintained rental units, abandoned apartment buildings, tenants trapped by housing gridlock in apartments no longer suitable for them, bureaucracies bloated with rent control enforcers.”

Presumably Rep. Kagan believes he is serving some constituency — bossy and intrusive local governments with little understanding of the consequences of their actions perhaps, since these policies ultimately do very little to help the poor.

Rick Wagner offers more thoughts on politics at his blog, The War on Wrong, which can be reached through the blogs entry at GJSentinel.com.